Response on a new digital finance strategy for Europe / FinTech action plan
FESE is in favour of targeted changes to existing regulation to allow for more clarity on which regulatory requirements have to be considered when deciding on the application of new technologies. On a general note, FESE believes that a predictable, consistent and straightforward legal environment should be promoted. Areas which would benefit from the review include licensing requirement for FinTech companies, data protection, conflict of laws, outsourcing, settlement finality and proper legal recognition of holding and transferring securities and other types of assets.
In our view, the existing EU financial services regulatory framework respects the principle of technology neutrality. Although, clarifications should be made to the EU financial services regime to accommodate new and emerging activities to effectively comply with the existing legislation. Furthermore, we don’t believe that it is innovation-friendly. There is little to no flexibility provided at EU level to incentivise the development of new innovations and the uptake of new technologies.
FESE has concerns regarding inter alia investor protection and firms conducting business without applying EU legislation in the context of crypto assets and ICOs. In addition, FESE has concerns with data protection issues in relation to DLT environments, as potentially this does not follow the requirements laid out in GDPR. We suggest that the referred technology companies / FinTech companies should also be subject to the established financial regulatory requirements when offering similar services (“same business, same risk, same rules”).
Cloud markets offer technological solutions in financial markets to innovate and should be supported. While the level of cybersecurity is already high, further advancements are required. Moreover, FESE would like to stress the asymmetries of power of negotiation between customer and Cloud Services Providers (CSPs). Furthermore, there is a clear need for EU rules covering cloud outsourcing, which on the one hand promotes the uptake of technology that makes the financial industry more competitive and on the other hand incorporates existing standards, which are already used by the industry.
We understand that the Commission is reflecting on implementing a policy in the area of financial services inspired by the principle of open finance (i.e. that data subjects must have “full control” over their data). However, in order for the policy to be successful, we believe that the Commission should adopt a clear objective of undertaking an ‘open finance’ approach, as it seems the principle is primarily linked to a market practice rather than a specific goal.